Oilpatch optimism high in Sask. amid surging prices at the pump
Saskatchewan made nearly $15M selling Crown oil and gas rights in 2021-22
While Saskatchewan's oil and gas sector stands to benefit from a recent surge in global oil prices, drivers are feeling the pain at the pump.
Patrick De Haan, head of petroleum analysis at GasBuddy, said Canadian fuel prices are currently at or near record-highs as pandemic supply and demand begins to level out.
In Regina Wednesday, most stations offered regular fuel at around $1.47 per litre. On the east and west coasts, it was nearly $1.70 per litre.
"It's going to be a particularly painful year, especially in the spring and early part of summer," De Haan said.
De Haan pointed to several factors including a significant decline in oil inventory, current geopolitical tensions involving Russia and Iran, and disruptions caused by the COVID-19 pandemic.
He estimates Canadians could end up spending an average of $65 to $85 to fill a passenger vehicle, and $80 to $100 for an SUV, in 2022.
"I do think as we progress into 2022 ... we'll probably see lower prices. Simply because the high prices we're expecting will incentivize oil companies to increase production wherever possible," he said.
Oil boom to bounce back?
Last Thursday, the North American benchmark price for oil surged to more than $90 US a barrel — its highest level since 2014.
On Feb. 1, Saskatchewan received its highest Crown oil and gas public offering result of 2021-22, generating more than $6.14 million in revenue for the province.
"These public offerings are a good bellwether of the state of the sector, and we haven't been anywhere near the $6-million figure since June of 2019," said Bronwyn Eyre, minister of energy and resources for Saskatchewan.
The province made nearly $15 million selling leases during the 2021-22 fiscal year — an increase of 131 per cent over the previous fiscal year.
A 194.5-hectare lease in the Estevan area went to Midale Petroleums Ltd., with a bonus bid of more than $528,000. A bonus bid is in addition to the rental and royalty per hectare.
Mayor of Estevan Roy Ludwig said the city has been hurting since 2014, when a price collapse caused widespread bankruptcy and layoffs in the energy sector.
"You could call it the oil boom. We had no places available, no hotel rooms, nothing to rent. We had people sleeping in their cars, tenting in their backyards," Ludwig said.
"It was a little insane that way. But we went from just going flat out, to basically idle."
According to the 2021 Census, Estevan is the small urban centre with the second-fastest declining population growth rate, down six per cent from 2016 to 2021. The current population is around 11,500 people.
Now is a perfect time to welcome our workers back in the oil industry. The price of housing is reasonable. We've got lots to rent, lots of available space.- Roy Ludwig, mayor of Estevan
Ludwig said with the rising price of oil and the recent lease sales, he's more optimistic about economic — and population — growth in the area.
"It's nice to see the prices starting to rebound. We're very excited about that. For us, that means jobs and economic activity," he said.
"Now is a perfect time to welcome our workers back in the oil industry. The price of housing is reasonable. We've got lots to rent, lots of available space."
The town of Lampman has around 735 people and is located roughly 48 kilometres northeast of Estevan in the rural municipality of Browning. Two leases southeast of the town were awarded to Millennium Land at $7,814.00 per hectare.
Greg Wallin, an administrative consultant with the RM, said the large oil field in the area started in the 1950s.
"In an old oil field, that's always a concern that you have, that it's a dying oil field and not an expanding one," Wallin said. "It's good to hear that [oil and gas] rights are going, so that it will continue."
Adam Stewart, manager of mineral land services with Millennium Land, said the company put in the bids on behalf of a client or clients, which will be made public at a later date.
Saskatchewan's opposition finance critic, Trent Wotherspoon, said it's good to see the conditions turn in favour of the hard-hit oil and gas sector — as long as revenues are used wisely.
"We need to make sure that those dollars are invested in our future, in economic diversification and strength for the long-term," he said.
"And, importantly, to make life more affordable, because certainly Saskatchewan people are facing serious cost of living increases."
The first Saskatchewan Crown oil and gas rights sale of the 2022-23 fiscal year is scheduled for April 5. It will include 207 leases covering more than 26,600 hectares and one exploration licence covering 812 hectares.
In November 2021, the Canadian Association of Energy Contractors (CAOEC) told the Canadian Press it expected increased drilling activity in 2022 to create 35,000 new jobs in Western Canada, an increase of 7,200 jobs year-over-year.
The CAOEC added it expects 6,457 oil and gas wells to be drilled in 2022, a more than 25 per cent increase from 2021.
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With files from The Canadian Press